Preview - Ladbrokes and Direct Line to report

Another load of earnings today, including from High street bookies

Ladbrokes reports today

Tuesday sees another host of UK earnings, including from insurer Direct Line plc (LON:DLG) and bookies Ladbrokes PLC (LON:LAD).

Direct Line is posting interims and in January this year, forecast a hit of up to £140mln from the floods that engulfed northern England.

The group expected claims resulting from damage caused by three storms would cost it between £110mln and £140mln.

City broker Numis said last week it expects a decrease for the half year in operating PBT (profit before tax) to £288mln as reserve releases begin to normalise from recent high levels as well as the £25mln charge for the Flood Re levy.

Analyst Nick Johnson said of more interest will be underwriting margins, particularly for the motor segment where guidance has been for reserve releases to make a smaller contribution than previous years.

"We forecast total group reserve releases of £193m in H1 compared to £215m in the comparative period. Current guidance is for a group combined ratio of 93-95% for FY16 assuming normal weather (we forecast 91.3% for 16H1)," he said.

The broker does not expect a special dividend this time round.

Ladbrokes' interims come after last week  the UK Competition and Markets Authority released its report into the proposed Ladbrokes and Coral mega merger, which said that 350-400 shops would have to be sold to remedy competition concerns in 642 local areas and traders will be keen to hear any update on this.

Irish stockbroker Goodbody said last week: "There is no doubt that the recent Brexit vote and subsequent worries regarding the UK consumer have had an impact on valuation. However, we continue to believe that a merger of Ladbrokes and Coral will drive significant upside from current levels (PT 160p)."

In April, the bookies blamed cut-throat competition for a rough ride at the Cheltenham Festival and said it faced a £3mln bill if Leicester City wins the Premier League, so an update here will also be interesting.

The bookmaker said it had had its “worst Cheltenham in living memory” as rivals fought for business, taking the shine off a first quarter in which results had otherwise been favourable.

Today should offer an insight into where the firm is focusing attention and the likely shape of activity for the rest of this year.

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